The first letters in a targeted outreach to more than 200,000 potential candidates for this assistance are arriving in homes this week; most of the letters will be mailed by the third quarter of this year. The bank estimates average monthly savings of 30 percent on mortgage payments of customers who qualify for this program.
“Building on home retention and payment assistance programs already in place, we are meeting our obligation to deliver this additional relief to our customers following the completion of the recent global mortgage settlement,” said Ron Sturzenegger, Legacy Asset Servicing executive. “To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities.”
Bank of America actually began making principal reduction offers under the program guidelines in March, initially concentrating on homeowners who were already in the modification review process. So far under this early initiative, about 5,000 trial modification offers have been mailed, providing a potential total of more than $700 million in forgiven principal. Homeowners are required to make at least three timely payments before the modification can become permanent.
The wave of mailings beginning this week will reach a broader base of customers who may be eligible for this principal reduction program. The letters provide each homeowner with a description of the program and an invitation to provide financial information to begin the review process.
To be eligible for this program, a homeowner must meet certain criteria, including:
- Owes more on the mortgage than the property is worth today.
- Was at least 60 days behind on payments on January 31, 2012.
- Has a contractual monthly payment for principal, interest, property taxes, hazard insurance and any applicable homeowner association fees totaling more than 25 percent of gross household income.
- Has a loan that is owned and serviced by Bank of America, or serviced for another investor that has given the bank delegated authority to do such modifications.
Fannie Mae, Freddie Mac and FHA/VA are not participating in the principal reduction program, but other modification programs which may provide comparable reductions in monthly payments are available on those loans.
A key goal of mortgage modifications is to provide an affordable monthly payment, based on borrower’s ability to pay. Most modification plans begin with a reduction of the interest rate, then an extension of the number of years to pay off the mortgage, then if necessary, interest-free forbearance of principal to be paid back at the end of the loan. Bank of America has offered principal forgiveness, but in more limited, targeted situations to eligible borrowers with certain types of mortgages.
Under the terms of the government settlement, the bank will strive to provide an affordable payment to qualified under-water homeowners by first reducing the principal balance to as low as 100 percent of the current property value, then lowering the interest rate and forbearing additional principal, as necessary, to reach the target payment. The settlement terms require a final calculation to determine that the cost incurred by the mortgage investor to modify the loan does not exceed the expected loss to the investor if it goes to foreclosure instead, commonly known as positive net present value.
For further information on the settlement programs, Bank of America Home Loans customers may call 1.877.488.7814.
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with approximately 5,700 retail banking offices and approximately 17,250 ATMs and award-winning online banking with 30 million active users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE:BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.
SOURCE: Bank of America